Greetings from TAG for the new year. We hope to be among the first to offer some insights and trends for travel in 2024 to help you plan ahead.
Many dynamics (and sources) are considered when forecasting travel, primarily interconnected economic factors that impact performance for general travel and its subcategories of lodging, hospitality, transportation, retail, and attractions.
As with any forecast, unexpected events will impact the results; these expectations are based on best assumptions and credible resources at this point in time, and of course, actual results will vary.
What to Look for in 2024:
Moderating price rises (assuming no economic disruptions)
Consumers relatively confident and continued spending (likely at more moderate rates)
Domestic demand to remain positive but may impact destinations differently
Slow but continued recovery of international inbound visitation and business travel
National & International Economic Factors Influencing Travel Demand
To look ahead, we review the positive and negative forces that shaped 2023 results, and their potential impact on the coming year.
Continued historically low unemployment rate and rising wages in 2023
Continued U.S. economic growth; stock markets reached records; expected mild U.S. recession did not materialize, although the economy grew slower over the second half of 2023
Fed Bank halted interest rates hikes in the second half of 2023, boosting investor confidence
Households still have disposable income and high net worth esp. in top income brackets
Consumers continuing to spend for experiences/travel remains a top priority
Inflation slowed notably in 2023, due to lower fuel and commodity costs, but prices for U.S. goods and services are still high here, and as compared to many other countries.
The 2023 economic scenario helped travel performance to be mainly positive. However, as discussed in the next section, uncertainties and shifts dampened the momentum (from 2022), with some markets and sectors demand and spending leveling off as the year progressed.
Travel volume during 2023 continued to grow (from 2021-2022) and some indicators were near or exceeded 2019 peak levels, including hotel room rates, U.S. domestic volume, and spending.
Air service resumed some normalcy with fewer cancellations; more flights and routes were added in many U.S. and international markets
While group demand is still lower versus 2019, growth rate rose
Economic (sources: Stifel and Tourism Economics)
Continued strength of U.S. dollar (vs. foreign currency)
U.S. interest rates remain at comparably high levels and may stay higher than historically into the foreseeable future
Consumer confidence in economy (misaligned with actual economic performance) softened during 2023
Rising household debt (above pre-pandemic levels), with some concern as to the extent that higher consumer debt (and lower savings) will impact their spending in 2024
Continuing war in Ukraine and new conflict in Middle East
Looming 2024 national election and uncertain impacts of outcome
Continued sluggish growth in international visitation especially; still lengthy foreign visa appointments and processing times
Int’l Asian markets, continue weaker/slower recovery than European (hurts U.S. west coast more than east coast destinations)
Uncertainty regarding U.S. and global inflation and its impact on general consumption and on travel prices for lodging, air-fares, meals out
Record U.S. domestic traveler volume going outside the U.S. possibly at expense of U.S. destination visitation
Travelers seeking “different” (e.g., non-U.S.) destinations and experiences
Business travel and group meetings demand grew but remain lower than 2019 (still related to cutback of corporate travel budgets and use of on-line meetings)
Forecast (data source: Travel Economics, for Visitor California, Forecast September, 2023)
Reported as of September, 2023; Tourism Economic is releasing its mid-January 2024 forecast; thus, some differences will occur, but TAG expects the magnitude and general direction to be comparable.
Tourism Economics revised 2023 GDP growth upward to 2.5%, but expects slower growth into 2024, projecting GDP growth next year at .2%, and 1.6% for 2025
Moderating inflation for 2024 at 2.8%, well below the 4.1% in 2023
Somewhat related, Fed-set U.S. interest rate hikes are expected to be eased (may or may not end) in 2024 (with a few countries already cutting rates).
A slight uptick projected for the 2024 unemployment rate, but still below 5%
Concerns about consumer depleted savings and rise in credit card debt (could impact travel)
Business travel expected to (continue) grow into 2024; was at 86% of 2019 level in 2023, forecast at 97% of 2019 level in 2024
Leisure travel reached 99% of its 2019 level in 2023, forecast to reach 103% in 2024
International inbound travel still only 82% of 2019 pre-pandemic levels as of mid-2023 expected to reach 2019 levels in 2025 or 2026. (note, outbound U.S. volume was at 115% of 2019 levels and could be impacting U.S. destinations)
Domestic demand grew in 2023 but at slower rate; reached 98% of 2019 volume in 2023; projected to reach 102% in 2024.